VenturesNow

Kenya is now the cheapest country to purchase diesel in Eastern Africa

Published

3 years ago

March 11, 2022

Africa News Watch

Kenya is now the cheapest country to purchase diesel in Eastern Africa

Culled from Businessdailyafrica

By John Mutua

SUMMARY

A litre of the commodity costs Sh112.63 on average in Kenya, compared to Sh118.44, Sh139.08 and Sh149.91 in three of the six East African Community countries, Tanzania, Uganda and Burundi, respectively.
This bucks a trend where Kenya has had the costliest super petrol and diesel in the region mainly due to relatively high taxes and levies.
The shift in the market structure is linked to the introduction of monthly subsidies in Kenya, which cut the current diesel prices by Sh23.29 a litre.

Diesel prices in Kenya are the lowest in eastern Africa in the wake of the monthly subsidy, reversing the market structure that made the country’s fuel the most costly in the region.

A litre of the commodity costs Sh112.63 on average in Kenya, compared to Sh118.44, Sh139.08 and Sh149.91 in three of the six East African Community countries, Tanzania, Uganda and Burundi, respectively.

This bucks a trend where Kenya has had the costliest super petrol and diesel in the region mainly due to relatively high taxes and levies, which encourage local motorists in border towns to fuel in the neighbouring countries.

The shift in the market structure is linked to the introduction of monthly subsidies in Kenya, which cut the current diesel prices by Sh23.29 a litre.

“The big difference is mainly attributed to the subsidy that the government has been using,” said an official at the Energy and Petroleum Regulatory Authority (Epra).

Kenya introduced the subsidy on April 14 last year as part of efforts to defuse simmering public anger over the high cost of basic items.

The subsidy has kept pump prices unchanged for the fourth month in a row despite a jump in the cost of shipping the refined fuel.

It is supported by billions of shillings raised from fuel consumers through the petroleum development levy, which was increased to Sh5.40 a litre in July 2020 from Sh0.40, a 1,250 percent rise.

The fund cushions consumers from volatility in fuel prices but has also seen motorists lose out when paying the Sh5.40 for a litre at the pump.

Tanzania is the only country in the region with cheaper super petrol than Kenya, according to the pricing list on GlobalPetrolPrices.com — a site that tracks fuel prices globally.

A litre of super petrol is averaging Sh131.63 in Kenya while in Tanzania it is going for Sh125.2. Uganda has the costliest super petrol in the region at Sh158.1 per litre followed by Burundi at Sh152.85.

In September last year, Kenya had the most expensive super petrol in the region at Sh134.72 per litre, while the commodity retailed at Sh131 in Uganda. It was the cheapest in Tanzania at Sh115.26. The relatively high cost in Kenya was linked to taxes and levies.

There are seven levies and two taxes that Epra takes into account when setting fuel prices, which have been blamed for the high cost of petroleum products. The levies accounted for nearly half of current petrol costs, shifting the spotlight to taxation of petroleum products.

Tanzania scrapped a Sh4.90 ($0.043) levy charged per litre of fuel in a bid to lower fuel prices from the start of this month.

Kenya’s fuel subsidy has been crippled in the wake of the Russia-Ukraine war that pushed crude oil prices to levels seen more than 10 years ago.

Government sources say the Treasury will struggle to pay oil marketers more than Sh25 billion over the next two months to keep pump prices unchanged despite a jump in the cost of shipping the commodity.

The current fuel being consumed in Kenya is based on the average crude oil prices of $82.03 a barrel, and the monthly review set for next Tuesday at $92.

Oil prices have jumped more than 30 per cent since 24 February, touching $139 a barrel at one point this week.

The oil price had fallen back to about $106 a barrel at one point on Wednesday, but by Thursday morning it was trading at around $116.

Officials at the energy regulator Epra reckon that the Treasury would require at least Sh10 billion this month and another Sh15 billion in April to compensate oil marketers and keep local pump prices unchanged.

With the fund supporting the subsidy exhausted, the Treasury will struggle to pay the marketers billions of shillings at a time when it’s faced with rising spending pressure from critical items like the August General Election and Covid-19 vaccines.

jmutua@ke.nationmedia.com

VenturesNow

Finance minister says reduced oil prices pressuring Angola

Published

1 hour ago

October 26, 2024

Ifeoluwa Dada

Angola’s finance minister has told journalists that falling oil prices put “lots of pressure” on the nation, predicting that prices would average between $70 and $72 per barrel in 2024 as opposed to $75.

In an interview conducted on the fringes of the IMF and World Bank annual meetings in Washington, Finance Minister Vera Daves de Sousa stated that the government of the continent’s second-largest crude oil exporter will likewise keep phasing down fuel subsidies.

“How many steps we didn’t decide yet, but our idea is to do it in steps,” she said, confirming that subsidies were amounting to around 4% of GDP this year.

At the start of this year, Angola departed from the Organisation of the Petroleum Exporting Countries.

On Friday, Brent crude futures rose 2.25% to $76.05 a barrel. Analysts have cautioned that next year’s high supply and weak demand will put pressure on oil prices.

According to Daves de Sousa, the administration will submit its budget to Parliament the following week, and during the next few days, the numbers regarding the amount of outside funding that will be required will be finalised.

Angola is considering internally whether to apply for a loan program from the International Monetary Fund, she said.

“We asked for a note with options of programs in case we request, and considering our current situation, what they understand as a good program for us,” she said.

According to her, the administration was also looking at other options, such as combining funds from domestic banks and capital markets with support from other multilateral sources like the World Bank and the African Development Bank.

Angola’s most recent IMF program, worth $3.7 billion, was approved in December 2018 after the country’s earnings were severely damaged by the collapse of global petroleum prices.

Angola’s finance minister has told journalists that falling oil prices puts “lots of pressure” on the nation, predicting that prices would average between $70 and $72 per barrel in 2024 as opposed to $75.

“How many steps we didn’t decide yet, but our idea is to do it in steps,” she said, confirming that subsidies were amounting to around 4% of GDP this year.

At the start of this year, Angola departed from the Organisation of the Petroleum Exporting Countries.

On Friday, Brent crude futures rose 2.25% to $76.05 a barrel. Analysts have cautioned that next year’s high supply and weak demand will put pressure on oil prices.

Angola is considering internally whether to apply for a loan program from the International Monetary Fund, she said.

“We asked for a note with options of programs in case we request, and considering our current situation, what they understand as a good program for us,” she said.

Angola’s most recent IMF program, worth $3.7 billion, was approved in December 2018 after the country’s earnings were severely damaged by the collapse of global petroleum prices.

VenturesNow

IMF recommends exporting African countries make crucial changes. Here’s why

Published

1 hour ago

October 26, 2024

Ifeoluwa Dada

Abebe Aemro Selassie, director of the International Monetary Fund (IMF) Africa, has stated that countries in Sub-Saharan Africa that rely on commodity exports must change their economies to address uneven regional economic growth.

According to the IMF’s most recent World Economic Outlook, which was released this week, the region is predicted to develop by 3.6% this year, which is unchanged from last year and lower than an April prediction of 3.8%. Commodity economies are likely to lag behind their more diverse rivals.

According to the IMF’s assessment, the growth of the commodity-intensive nations is around half that of the rest of the region, with oil exporters bearing the brunt of what it called “subdued and uneven” regional growth.

“South Sudan, Nigeria, Angola are all very much in that camp,” Abebe told Reuters.

The IMF’s regional economic outlook for Sub-Saharan Africa was released on Friday, and while diverse economies like Senegal and Tanzania are predicted to develop at a rate higher than the regional average, Nigeria would only grow at a rate of 2.9%.

“They have had very large macroeconomic imbalances, financing challenges which have held back growth,” Abebe said.

He claimed that because those issues had led to rising inflation and pressure on the expense of living, the Nigerian government needed to “squarely address” them.

The administration of President Bola Tinubu has started a number of measures that it claims are intended to boost economic expansion and draw in foreign investment. The IMF predicted that South Africa, whose growth has been hampered by debilitating power outages, would expand by 1.1% this year.

The IMF stated that armed conflicts are also impeding growth, pointing to the fact that South Sudan’s oil exports are impeded by fighting in neighbouring Sudan, where the crude export pipeline is located.

“They (oil exporters) need to find new sources of growth, get more private sector investment – so working on reforms that will facilitate that is important,” Abebe said.

According to the IMF research, Sub-Saharan Africa’s economic growth is anticipated to improve marginally to 4.2% in the upcoming year.

Although Sub-Saharan Africa accounted for almost half of the world’s 20 fastest-growing economies this year, the research issued a warning that greater growth rates were necessary to combat pervasive poverty and inequality.

According to the IMF, as nations grapple with high debt loads and high debt servicing costs, one of the primary barriers to higher growth is a lack of access to inexpensive financing.

The fresh money was expensive, even though some nations were able to sell bonds on global capital markets this year after a two-year break brought on by geopolitical shocks and high interest rates in developed nations like the US.

“The old development finance architecture is not delivering, and, if anything, kind of is in the process of disintegrating,” Abebe said, citing “very problematic levels” of official bilateral funding for poor countries.